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Compensation cess causes jump in tax administration expenditure The expenditure on tax administration saw a huge jump to Rs. 777.5 billion in the FY18 Revised Estimates (RE) from just Rs. 126.9 billion in the Budget Estimatge (BE) of that year. Further, it is projected to reach Rs. 1 Trillion in the FY 19 BE. This gave an impression that the government is incurring such a huge cost on tax administration.The finance ministry said expenditure on tax administration includes compnesation cess, which would ultimately got o the states and this was the reason behind such a huge jump. of the Rs. 777.5 billion in RE of FY18, Rs. 613.3 billion is compensation cess. Similarly, Rs. 900 billion of over Rs. 1 trillion is compensation cess in BE of Fy 19. A companestaion Cess of the same amounts were also shown in the receipts of the government. As such, it is just a book entry, Finance Secretary Hasmukh Adhia said. The Business Standard, New Delhi, 03rd February 2018

Trai asks DoT to review licence, spectrum fees levied on telecom firm Trai also asks the telecom department to quickly resolve issues related to gross revenue and adjusted gross revenue (AGR) which are being litigated in various forum The Telecom Regulatory Authority of India (Trai) has asked the department of telecommunications (DoT) to review the licence fees and spectrum usage charges paid by telecom operators and quickly resolve issues related to gross revenue and adjusted gross revenue which are being litigated in various forums In its “Inputs for Formulation of National Telecom Policy- 2018”, made public on Friday, Trai said that there is a need to review the rates of levies paid by operators since access spectrum is now being assigned through auction, and telecommunication networks have become the underlying infrastructure for growth of the digital econom Adjusted gross revenue (AGR) is the basis on which DoT calculates levies payable by operators and has been a bone of contention …

Tax loophole plugged for corporate mergers The Union Budget for 2018-19 has proposed to tax all mergers and amalgamations in which a company with higher accumulated profit merges with a company with lower profits, or with a company that made losses, and reduced capital to avoid paying dividend distribution tax (DDT). The move assumes significance as companies, mainly multinationals and the unlisted ones, announced mergers in the past few years to escape the liability of paying tax on distributed profits in India. According to tax experts, this will impact all mergers — for listed as well as unlisted companies — that were announced in the past few years, and reduction of capital that took place in the last one year.“For the purpose of calculation of dividend under Section 2(22) of the Income Tax Act, accumulated profits shall also include accumulated profits of the amalgamating company on the date of amalgamation. This has plugged the loophole, wherein companies, by following the purchase …

Higher taxes spark panic among FPIs The government’s decision to reintroduce the long-term capital gains (LTCG) tax has spooked foreign portfolio investors (FPIs), who rushed to the finance ministry on Friday to seek relief. Sources said FPIs were concerned about the escalation in the costs for investing in India vis-àvis other Asian and emerging markets (EM). Overseas investors were also worried whether the ‘grandfathering’ relief would be extended to them. While news about the LTCG tax has been doing the rounds for a while, FPIs were hopeful of status quo on the tax benefit on shares held for the longer term. At the most, foreign funds had braced for an increase in the time period from one year to two years or three years for availing of the LTCG exemption. Most foreign funds are peeved over the reintroduction of the tax without the abolition of the securities transactional tax (STT). In 2004, the STT was introduced as a substitute for the LTCG tax. In the Union Budget on Thursday, Fin…

RBI once again cancels Rs 110 bn-worth bond auction as yields shoot up This is the third time since December 29 that the central bank has cancelled, either fully or partly, an auction The Reserve Bank of India (RBI) on Friday once again cancelled its scheduled auction of dated securities, signalling its discomfort with yields. The cancellation of Rs 110 billion worth of bonds was a good enough reason for the 10-year bond yields to cool down by a steep 17 basis points from its day's highs. The yields topped 7.67 per cent at noon and then corrected to 7.50 per cent by the afternoon after rumours of potential secondary market bond purchases by the RBI, but the yields rose again to close at 7.56 per cent. This is the third time since December 29 that the central bank has cancelled, either fully or partly, an auction. While each time it didn't give a reason, it is clear that a sudden spike in yields was the reason for not accepting any bids that bidders would have placed with the centr…

Fiscal deficit target revised to boost spending in 2018-19 However, the more worrying aspect is that the government’s revenue deficit shot up to 2.6% of GDP in 2017-18 from the budget estimate of 1.9% of GDP, showing signs of the deteriorating quality of fiscal consolidationFinance minister Arun Jaitley has set the fiscal deficit target for 2018-19 at 3.3% of the gross domestic product (GDP) to accommodate higher demand for expenditure against the earlier target of 3%. The government also revised the deficit target for the year ending in March 2018 to 3.5% of GDP from the targeted 3.2%.In his last full budget, Jaitley also accepted key recommendations of the N.K. Singh Committee on fiscal discipline to reduce debt-to-GDP ratio to 40% by 2024-25 from 50.1% in 2017-18 and has introduced amendments to the present Fiscal Responsibility and Budget Management Act. The government now aims to reduce its debt-to-GDP ratio to 48.8% in 2018-19, 46.7% in 2019-20 and 44.6% in 2020-21, while fiscal de…